Last year we wrote about a significant change to the mechanics of reporting Capital Gains Tax (CGT) due on the sale of UK properties that came into action on 6th April 2020. Now that this date has passed, and the new rules are in place, it’s definitely worth reminding you of the implications of the change!
The basics of the new rules are:
- Capital gains on the sale of residential properties are to be reported to HMRC within 30 days of completion;
- Capital gains tax on these gains are also to be paid within the same 30 day period.
- Any over or underpayments will get ironed out when your annual self assessment tax return is completed.
The upside to all of this is that you shouldn’t need to ‘earmark’ that cash for CGT up to 22 months after the completion date. Under the old rules it was an easy and well-trodden mistake to wake up in January and realise that you’ve got £30k in CGT to pay by the end of the month on top of your income tax, which you’ve already spent on your shiny new extension!
However, the practicality of being in a position to report and pay CGT within 30 days of completion isn’t straight forward. The most likely detail to cause problems is that CGT rates are based on your total income for the tax year. This means that unless you already have a fairly concrete tax plan in place, it may be challenging to arrive at an estimated total income for a tax year that hasn’t finished yet.
The only times which this won’t apply, are:
- If you didn’t actually make a gain on the sale;
- If the gains on the sale are covered by your annual exemption for CGT;
- If the property you’ve sold isn’t in the UK;
- If it’s your home that you’ve sold.
If you’re thinking about selling, or if you have recently sold a property, get in touch to see how we can help.